June brought another month of services economy growth, according to the new edition of the ISM Services PMI Report, which was released today by the Institute for Supply Management (ISM).
The June Services PMI reading, at 54 (a reading above 50 represents expansion and below 50 indicates contraction), was off 0.5% compared to May, growing, at a faster rate for the 24th consecutive month, with the overall economy growing, at a slower rate, for the 73rd consecutive month.
The June reading is 0.9% above the 53.1 12-month average, with February’s 56.1 and September 2025’s 50.3 marking the respective high and low readings over that span.
ISM reported that 17 of the services sectors it tracks grew in June: Arts, Entertainment & Recreation; Mining; Wholesale Trade; Transportation & Warehousing; Finance & Insurance; Accommodation & Food Services; Retail Trade; Other Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; Information; Construction; Utilities; and Real Estate, Rental & Leasing. The four sectors reporting contraction in the month of June were: Agriculture, Forestry, Fishing & Hunting; Educational Services; Management of Companies & Support Services; and Public Administration.
The report’s subindexes that factor into the PMI were mixed, including:
- Business Activity/Production, at 55.4, down 2.3%, growing, at a slower rate, for the 24rd consecutive month, with 13 sectors seeing gains;
- New Orders, at 55.1, fell 2.2%, growing, at a slower rate, for the 13th consecutive month and expanding in 40 of the last 42 months, with 12 sectors reporting increases in new orders;
- Employment, at 51.2, rose 3.3%, growing, after three months of contraction, with nine sectors reporting employment gains; and
- Supplier Deliveries, at 54.4 (a reading above 50 indicates contraction), were down 0.8%, slowing, at a slower rate, for the 19th consecutive month
Comments from ISM member panelists included in the report highlighted various trends in the services sector, with business conditions, tariffs, and prices receiving a fair amount of attention.
“We continue to experience higher prices due to the Persian Gulf conflict through rising diesel fuel costs and increased input costs for resin-based packaging,” said an Accommodation & Food Services panelist. “The brunt of the impact will be experienced in the third quarter (Q3) of 2026, but we are feeling the impact now. Suppliers are aggressively attempting to pass through price increases.”
A Retail Trade panelist noted that business has been very strong during what is usually a less active time of the year, adding that pricing is stable, and employment just where we want it to be. Supply chain strong with no challenges.
In an interview with LM, Steve Miller, Chair of the ISM Services Business Survey Committee, said that, in assessing the report’s key findings, each of the its subindexes are in expansion territory and above their respective 12-month averages.
“If you look from January through June, you can’t find a six-month stretch like this until you get into the second half of 2022,” said Miller. “I think that is really good. One thing that is a kind of back and forth for me is that the 54 [Services PMI reading] means that 0.5% are now saying that things were the same in June as they were in May.”
The June Prices reading, at 67.7, fell 3.6% compared to May, snapping a months-long stretch of Prices’ readings in the 70s, which, in many ways, was a byproduct of the Iran conflict. Which was also reflected in fewer panelists comments citing the war, in assessing business conditions.
That was backed up by Miller, whom observed that comments about the war are getting the same amount of attention as other topics, like tariffs and oil—while also noting that the coming months will be interesting to monitor, especially as it relates to energy prices.
“Prices remain the biggest risk factor and are completely dependent on what happens in the Persian Gulf,” said Miller. “But even if that were to continue to be a problem, it seems if China demand is down 40%, I think some of those other dynamics will help us out. I think we’ve seen, the worst of it. The ISM semiannual report indicated that as well. In the first half of the year, we saw significant pricing increases, and with the AI and data center-related items, we’re going to continue to see significant escalation in those, but they are very isolated and offset in general by oil prices. Capitalists don’t like to see prices drop too fast. It will be interesting to see if there is an irrefutable cost impact reduction for food, for example, of if we see a shortage of fertilizer from Ukraine continue to impact production, which keeps food prices elevated.”
And he also observed that if conditions remain at current levels, coupled with the coming mid-term elections, which has significant advertising spending going into the debt services side, that the Services PMI will remain in the mid-50s.
